If remedial works are needed, what steps should be taken to recover the costs?
There continues to be a lot of activity around decisions to carry out remedial works to partly or wholly completed buildings, yet still perhaps some confusion about the basic principles of what needs to be considered when trying to work out who may be at fault.
The first step is to establish that the design, works and/or materials are defective because they are not in line with either contractual requirements or some other duty or obligation.
The contractual documentation should be reviewed to identify obligations owed and by whom. There will be the question of who had the responsibility for the design and what was the agreed standard of care. The contract might contain deleterious material clauses, and there are usually additional duties over and above compliance with legislation, such as use of good practice and adherence to manufacturers’ guidelines. Under some contractual arrangements the contractor may have ongoing maintenance obligations that may not have been adhered to.
When the relevant obligations have been established, the next step is to ascertain whether the building as designed and/or constructed is in breach of any of these
When the relevant obligations have been established, the next step is to ascertain whether the building as designed and/or constructed is in breach of any of these. This usually requires expert evidence. If you want to maintain privilege over any report from an expert witness (so that it would not need to be disclosed in any future proceedings) then you should ensure that the expert witness is instructed by externally appointed solicitors.
Section 1 of the Defective Premises Act 1972 (DPA) could provide another avenue for a possible claim, especially if you do not have the benefit of recourse under a formal contract. To bring a claim under the DPA, you would have to show (again usually through expert witness evidence) that there are defective works, defective design or inadequate materials and that those issues have rendered a dwelling unfit for habitation.
If the works are on-going or are still within in the defects rectification period, you should ensure that you correctly notify other parties and check whether you are contractually obliged to give the contractor the opportunity to rectify the works (if the defect is in their works or design). If works have completed, then you should check for any time limit for bringing a claim. If there is no express provision then the statutory time limits, dependant on how the contract was executed, will be relevant. If the defect/problem is design/specification related you should ask the contractor/ consultant to notify their professional indemnity insurers.
You will also need to ensure the wrongdoer is sufficiently solvent or adequately insured for the consequences of its actions (or inactions)
Subject to any limits or caps on liability, the main head of loss is usually the reasonable cost of remedial works. This cost must be proportionate to the breach, and there is an overriding duty to mitigate losses. Any additional costs of repairing to any higher specification are not usually recoverable.
An important matter to consider before making a formal claim under your contractual dispute resolution procedure, or in the courts, is that claims can take up a great deal of management time and other expenses and there is no guarantee you will be reimbursed all your costs, even if you are successful. You will also need to ensure the wrongdoer is sufficiently solvent or adequately insured for the consequences of its actions (or inactions). If that is not the case, then all may not be lost. You could look at the possibility of calling on any performance bonds or parent company guarantees, or exploring whether collateral warranties give the option of pursuing a more financially viable party such as a subcontractor or member of the professional team.
If it is necessary to undertake the remedial works before pursuing a claim because of safety/time constraints, you should be mindful not to say or do anything that could waive any claim you may have against third parties; and if the contractors/ consultants have notified their insurers and/or you want the comfort of a possible claim with the benefit of insurance, the insurers will need to be on board and agree to those arrangements – a time factor that will need to be taken into account.
The arrangements would need to be documented carefully with legal input and you will also need to identify and retain evidence. If your organisation is a “contracting authority” for the purposes of the Public Contracts Regulations 2015, your procurement obligations will need to be considered.
This is not a definitive list but a good starting point for what should be on your radar if the decision is taken to carry out remedial works and that decision needs to be/is informed by potential recovery of costs at a later stage or as part of those arrangements.
Stephanie Canham is head of construction at law firm Trowers & Hamlins